Preaching at the Juggernaut: The Constitution and the IRS

Tax-paying month is also tax-resisting month, and all over the United States hundreds of earnest Americans, having talked to anti-tax friends, read the Constitution carefully, read a book, taken a “tax-resistance seminar,” or done all of these, are filing what the IRS considers to be illegal income tax returns, secure in the thought that the Constitution of the United States will protect that action. Well, it won’t.

Although rebellion against taxes antedates the Constitution itself in this land, the present wave of constitutional protesters of the income tax can be said to have started with Vivien Kellems, who on February 20, 1948, stopped collecting withholding taxes from her employees at her manufacturing company in Westport, Connecticut. Her intention was not to encourage her employees to evade paying taxes — in fact, she explained to them what she was doing, and the employees thereupon all paid their taxes directly to the Bureau of Internal Revenue. Her intention was to test the constitutionality of the withholding tax law by claiming in court that it violates the Thirteenth Amendment’s prohibition of involuntary servitude. As she wrote to the Secretary of the Treasury:

If Congress should pass a law compelling me to dig a ditch for the Internal Revenue Department, and, adding insult to injury, compel me to buy the shovel with which to dig, I doubt if you could enforce that law. Under our Constitution, there is absolutely no difference between forcing me to buy a shovel and dig and forcing me to collect taxes and to pay for collecting them. Both are involuntary servitude expressly forbidden under the Thirteenth Amendment.

A thought-provoking argument, you might think. The Supreme Court must have had a difficult time with that one. It didn’t, because it never had to hear it. Although Miss Kellems publicly announced her opposition to withholding and her refusal to do it and asked to be arrested in order to test the constitutionality of the law, she was not. Instead, the IRS seized double the amount in question from her bank account, even though all taxes due had already been paid directly to the IRS by Kellems’s employees.

So Miss Kellems arranged with her employees to photograph them buying money orders to pay their taxes, and sent copies of the photos with the money orders to the IRS by registered mail. She wrote several times to the Secretary of the Treasury and twice to the President of the United States, asking to be indicted.

She still was not. She then brought two suits against the IRS after it seized money from her bank account again. She won recovery of the money seized in the second raid in a jury trial, and lost a second suit which was decided by a judge. But the constitutionality of the withholding tax law was never allowed to be tested. In 1952 she wrote a book based on these experiences: Toil, Taxes, and Trouble.

In the late 1960s, she finally became an overt tax rebel by refusing to surrender her records to the IRS when they questioned her deductions. In retaliation, the IRS merely disallowed all of the deductions claimed for the years in question and assessed her thousands of dollars in additional taxes, which she refused to pay. From the time of this confrontation until she died eight years later, in 1975, she filed no returns and she paid no taxes.

According to a book which encourages such anti-tax actions, The Continuing Tax Rebellion: What Millions of Americans are Doing to Restore Constitutional Government, by Martin A. Larson (Devin-Adair, 1979), she had become so sensitive a case that the IRS had decided she must not be prosecuted, and no action was taken against her. Mr. Larson goes on to state, “Shortly after her death, I received a letter from the firm of attorneys who handled her $1.8 million estate and who stated that only $265,000 had been paid the government in complete settlement. Thus no income taxes were paid even after her death.”

In other words, Vivien Kellems, even though she never got the constitutional test case she was seeking, nevertheless made the IRS back down. Or did she? A story on tax rebels in Barron’s by James Grant, dated April 2, 1979, reported, “Last April, it was disclosed that the government had recovered some $816,949.97 from Miss Kellems’ estate.” So whatever was “settled” shortly after Kellems’s death was not really settled until the IRS had taken what it wanted.

Undaunted by the inconclusiveness of Vivien Kellems’s fight, a number of people with what they see as convincing constitutional arguments against taxation are busy telling as much of the American public as they can get to listen to them that “you too can be a tax resister—without jeopardy.” The reasoning seems to be that the particular argument that the particular tax-resistance seminar leader advocates is so compelling that the IRS wouldn’t dare to let it be tested in court (which may be so, but in a way they don’t anticipate, as we will see in a moment). Such tax resisters, according to an article in The Wall Street Journal (March 26, 1979) “spout an array of legalistic arguments. They claim that the federal income tax violates, among other things, the Con-

Tax-resister Irwin Schiff was certain that he would never be arrested because his arguments were incontestable. He is now appealing his second conviction.

stitution, Magna Carta, the Mayflower Compact, the Northwest Ordinance, the Articles of Confederation and the Bible.”

I spoke at a state convention of the Libertarian Party of Connecticut in 1976 or 1977, where a fellow speaker was a tax-resister named Irwin Schiff. Mr. Schiff explained to a rapt audience that since 1973 he had been filing returns, as the law required, but had refused to fill in the blanks or compute a tax as the returns directed. Instead, he appended case citations and other material to inform the government that the Fifth Amendment meant that he didn’t need to fill in the information asked for because to do so would be to incriminate himself. Schiff also informed the government, he said, that “I received no money income, only irredeemable, non-interest bearing, worthless notes of a Federal Reserve Bank, which are not redeemable in ‘lawful money.’”

Schiff concluded his talk at the convention by saying that he had not been arrested and indicted because the IRS knew that his argument was incontrovertible. Anyone who wanted to follow in his footsteps, he was convinced, would be similarly immune from prosecution.

Mr. Schiff was wrong. It took them a couple of years, but they did arrest him. And they didn’t even rely on his incriminating himself—the IRS subpoenaed his bank records. He was convicted on February 13, 1979, of two counts of willfully failing to file a return. A new trial was ordered early in 1980 by the U. S. Second Circuit Court of Appeals because a prejudicial videotape was shown to the jury, on which Tom Snyder of NBC’s Tomorrow show told Schiff, “You’re going to jail—do you know that?” He has since been convicted again, and is in the process of appealing the second conviction at this writing.

The contentions presented by Irwin Schiff: the Fifth Amendment argument against self-incrimination (some tax rebels call the IRS form 1040 a “confession sheet”) and the monetary argument (Article I Section 8 of the Constitution gives the federal government the power “to coin money, and regulate the value thereof”; Section 10 provides that “No State shall...coin money, emit bills of credit; make anything but gold and silver coin a tender in payment of debts”; and the Coinage Act of 1792 defines a “dollar” as 412.5 grains of 90 percent silver or 1/42 troy ounce of fine gold) are not the only arguments based on the Constitution which tax rebels have used, although they are perhaps the most widespread.

There are several arguments leveled against the constitutionality of the Sixteenth (income tax) Amendment, one of which is that wages do not constitute income, and another, that Ohio hadn’t been properly been voted into the Union at the time that it ratified the Amendment.

There is also, according to the right wing newspaper American Crisis, an argument based on Article I Section 9, which “prohibits the government from conferring any ‘title of nobility.’ The tax rebels interpret this as an injunction prohibiting the government from establishing a ‘privileged’ class of citizens as distinguished from a ‘discriminated’ class. They claim that all government cash subsidies violate this clause. By taking money from some citizens for the exclusive benefit of other citizens, the government is, in fact, setting up two classes of citizens. One class, a ‘nobility’ if you will, is to be served and maintained at the expense of the other class....”

Unfortunately, impressive as such arguments may seem to be to their adherents, they usually are not even allowed to be argued in court.

A federal judge in Salt Lake City, Utah, in July, 1972 denied John T. Grismore the right to quote the Constitution in defending himself from a charge of impeding federal officers in the performance of their duty. He had refused to allow IRS agents to remove a car without a court order, to satisfy a tax assessment. “Since his whole defense was based on the Constitution, on his rights thereunder and his duty as a citizen to uphold those rights, this left him in a virtually indefensible position,” wrote Henry J. Hohenstein in The IRS Conspiracy (Nash Publishing, 1974). “Moreover, since some hint of constitutionalism had been bandied about (though the jury had been instructed to disregard it) the judge, in his final instructions solemnly warned the jurors that the Constitution was ‘irrelevant’!”

At the trial of Dr. James A. Owen in Portland, Oregon, in December, 1972 the judge consistently sustained objections to constitutional arguments from the government prosecutor, and when Dr. Owen tried to quote the document in his summary to the jury, the judge said, “Doctor, I’ve told you not to make that argument. I do not intend to repeat the admonition.”

That same month, a group of individuals who became know to the media as The San Diego Ten were tried for conspiracy and “attempting to rescue property seized by the IRS” before a judge who barred from the jury anyone doubt-ing the constitutionality of the Internal Revenue Code and who made it a contempt-of-court offense to quote from the Constitution.

One of the leaders of tax resistance seminars, Marvin Cooley of Mesa, Arizona, was arrested 5 months after his anti-IRS book, The Big Bluff, was published. He was sentenced to three years in jail on October 28, 1973, after a trial during which the defense was forbidden to mention the Constitution in the jury’s hearing.

Dr. Edward A. Cupp brought suit in a District Court in Pennsylvania to dismiss an IRS tax assessment which had been compiled by obtaining his bank records after he had filed three years of protest returns, using the monetary argument. He also argued in his suit that many of the IRS provisions were unconstitutional. On August 14, 1973, his suit was dismissed and his constitutional arguments were declared to be without merit.

Mike Tecton, a successful architect of McLean, Virginia, who became convinced that the federal system of taxation was unconstitutional and therefore filed no tax returns for 15 years, was brought to court soon after he began to make this conviction public in 1973. His first trial ended in a deadlocked jury; at his second trial in September, 1974 he was told by the judge that he would be held in contempt if he argued the unconstitutionality of the tax laws.

And in Seattle, Washington, another anti-tax activist, Walter M. Froembgen, charged with threatening violence against a federal agent in the performance of his duty, heard the judge tell the jury that the IRS is constitutional and his instructions on the law must be obeyed by them, at his trial and conviction in April, 1979.

One person who has learned the hard way that arguments which seem convincing may not prevail in court is airline pilot and flight engineer Sam Goeltz, who was arrested in 1973 in Salt Lake City. Marvin Cooley was a big influence in getting him into tax resistance, says Goeltz, and he is full of admiration for Cooley and other pioneer tax rebels, who he says were “fantastic guys and very courageous individuals.” But, he says, among other things he didn’t reckon with the fact that, unlike the people running tax seminars, he was on a salary, which could be attached by the IRS. “And so, you know, I was misled. I wasn’t knowledgeable enough. And neither were they.” He learned about his vulnerability only after he was already involved with the law, he told me. “I was just one of those guys flying down the mountain on a pair of runaway skis, and there wasn’t a lot I could do about it at the time.”

So Sam Goeltz, tax protester, was arrested with his co-protester Karl Bray by a combined group of IRS undercover people and FBI men about 10:30 or 11:00 o’clock one night, “and they put us in the slammer and kept us there for about 16 or 17 hours while they were trying to come up with a charge.”

Finally, “they” decided to invoke a never-used 1932 law against “illegal possession of a government seal.” Goeltz and Bray had obtained, perfectly legally, an IRS seizure notice which bore in its upper left hand corner the IRS logo. This, said the government, was a government seal — and possession by the accused was banned by a law originally written to prevent anyone from using sheriff’s or marshal’s badges to muscle in on food lines during the Depression.

And the charge stuck. In 1974, the two came up before a man they had coincidentally been working to impeach for three years, Judge Willis Ritter, who refused to disqualify himself, refused them a jury trial, and sentenced them each to six months in jail (even though the seizure notice had been obtained through the Freedom of Information Act), saying that Goeltz and Bray intended to use the “government seal” against the interests of the government.

How had they intended to use it? “We intended to use it to show people that the IRS goes out and seizes property without going through a court,” says Goeltz today.

But telling people that the IRS seizes property in a way that may violate the Fourth Amendment, and showing people documents that have been gained through the Freedom of Information Act is obviously exercising the right of political speech, something supposedly guaranteed by the First Amendment. Nevertheless, when Karl Bray and Sam Goeltz appealed their conviction, it was upheld by a three-judge tribunal, and they served their time, even though, Goeltz points out, “They acknowledged that our First Amendment rights were abridged to a significant degree.” Why wasn’t that enough to overturn the conviction?

The answer is, of course, that the Constitution doesn’t only limit the powers of government, it also specifically grants powers to the federal government, one of the most important of which is the power to tax. Courts balance the “needs” of the government against the rights of the individual—and any time there is a conflict, the government wins. In the case of taxation, the very point that the tax rebels pin their hopes on—the point that if the guarantees of the Bill of Rights were upheld in this area, the IRS would be out of business, putting the government largely out of business—is the reason that federal courts refuse to admit constitutional arguments.

Henry Hohenstein put it this way in The IRS Conspiracy: Often literature issued and circulated by various tax protest groups is especially dangerous in this respect. Everything they say is true. Everything they say is valid. But the trouble is, it’s all based on the Constitution!

They say the IRS has no legal right to examine your tax records unless you voluntarily submit them; and that an IRS attorney admitted to a congressional committee that the IRS would have to respect a “good faith” challenge based on the Fifth Amendment.

They say the IRS has no legal right to force employers to collect withholding taxes from employees, since this is a violation of the “involuntary servitude” guarantees of the Constitution.

They say tax courts are illegal, since they do not have trial by jury and are, in fact, a part of the executive branch of the government.

They say the IRS has no legal right to levy upon wages or bank accounts when the amount in dispute is over $20.

And this is true…. That’s why the document is dangerous: IRS will handle its case against you in its own way, on the basis of statute law. And the federal judge who hears the case will decide on that basis, too. He will assert, as the judge in Grismore’s case did, that the Constitution and its supposed guarantees of your freedom are “irrelevant” to your case.

Sam Goeltz concurs. “Of course, as a libertarian, the entire thrust of taxation is contrary to what I believe, because it is theft,” he says. But, he continues, “Regardless of the correctness in a philosophical sense of one’s arguments against taxation, these arguments are not going to be upheld in court in the long run, because of the supposed ‘greater need’ to continue the government.”

What advice would he give to someone considering a refusal to pay taxes on constitutional grounds? Examine the consequences of such an action carefully. “There are still people out there who are leading people down the primrose path.” If you are considering divesting yourself of property by putting it in the name of someone else, be aware that you have to do so before making any move against the taxing authorities. Expect that you will lose property, and be aware, too, as he was not when he started his protest, that your salary can be seized by the government. And at all cost avoid any actions that could be considered to be fraud or conspiracy, because the penalties for these offenses are a $10,000 fine and ten years in jail.

If you have considered all this, and are still “willing to risk a lot of time, and a lot of money and harassment,” then start researching past cases of tax protest. You will find, says Goeltz, “that the money issue has not been upheld in court. And neither has the Fifth Amendment—testifying against yourself—which is in fact what you do.”

Instead, pay attention to the arguments which have been successful in court. The most successful protest cases, he points out, haven’t addressed themselves to the principle of taxation or to the IRS as an institution, but have attacked “the nuts and bolts” of how the Service operates. On this seemingly piecemeal basis, significant court battles have been won against the IRS, like the case of Phil and Sue Long of Bellevue, Washington, who used the Freedom of Information Act to force the IRS to let them copy thousands of pages of previously secret interoffice directives and procedure manuals.

“Would you do it again?” I asked. “Yes, but not in the way that I did,” Sam Goeltz answered. “To address the courts—the courts are perhaps the seat of the trouble.”

Karl Bray can’t be asked that question, as two years after he served his time in jail he died of cancer. Perhaps, had he lived, he might have moved as Sam Goeltz has, away from tax resistance into political activism. In 1980, Sam ran for the San Francisco Board of Supervisors as a Libertarian Party candidate. He explains it this way.

“You can’t live in the hope that you can simply stand up and tell the government to go jump in the lake, and you’ll survive. It’s just not going to happen. They have too many ways of getting to you. And there’s not going to be a mass uprising. People become entrenched in their ways, and they’re certainly not going to risk what security they might have now for an improved life further down the road. To think they will do it is ridiculous. “That’s why I think the main thrust should be through a political organization, to try and start a revamping of the system. But don’t approach the problem from the idea that the government is ever going to stop its source of revenue because it happens to see that what it’s doing is unconstitutional. We’re just not dealing with a principled society.”

The Thirteenth Amendment argument which Vivien Kellems tried to use against withholding taxes has also been used against the income tax itself—an argument which to many begins to seem more cogent as the annual Tax Freedom Day (computed annually by the Tax Foundation)—the date on which the average worker, working steadily from January 1, will have paid all taxes—reached May 6 in 1978, May 8 in 1979, and May 11 in 1980.

However, those idealists who might still be tempted to think that they may be able to use the Constitution to get the government to commit suicide would do well to contemplate the reaction of one Illinois legislator to the tax limitation movement that swept the country in 1979. State Representative Raymond Ewell of Chicago sponsored legislation that would require all citizens of Illinois who were between the ages of 7 and 64 to work a certain number of hours each year directly for the government. Those between the ages of 7 and 10 would work 12 hours; those 11 to 14, 24 hours; those 15 to 18, 48 hours; and those between 19 and 64, 96 hours.

“We are in a ‘Proposition 13’ era,” he said to an Associated Press reporter, “which means that there are no new tax increases on the horizon. So we must have some method of addressing increased costs.”

Involuntary servitude, anyone? As Sam Goeltz puts it, “We’re just not dealing with a principled society.”

Joan Kennedy Taylor is senior editor of LR.